Home / Regulatory & Government / ICA applauds ‘strong’ Budget’s hazard mitigation promise
12 October 2020
The Insurance Council of Australia (ICA) has welcomed last week’s Federal Budget, saying it is a strong step towards Australia’s recovery from both the COVID-19 pandemic and devastating summer bushfires.
CEO Andrew Hall says Mr Frydenberg’s statement that further announcements in relation to natural disaster mitigation will be made in response to the upcoming report of the Royal Commission into National Natural Disaster Arrangements is encouraging.
He notes $7.6 million has been pledged to upgrade the Australian Community Climate and Earth System Simulator. Currently only 3% of natural disaster funding is spent on resilience and mitigation.
“When that response comes, the Federal Government must take a lead on building a more resilient Australia,” Mr Hall says. “A significant investment is required.”
More than five years ago, the Productivity Commission recommended the Commonwealth invest at least $200 million a year in mitigation and resilience projects, matched by state and territory governments. At present more than 97% of natural disaster funding is spent on clean-up and recovery.
The ICA provided evidence to the royal commission on the importance of mitigation and resilience programs to reduce risk, along with an urgent need for reform of state taxes on insurance policies and significant improvements to building codes and land-use planning.
“Insurers in Australia will continue to contribute their expertise to assist the Commonwealth in improving community resilience with data and insights,” Mr Hall says.
The National Insurance Brokers Association (NIBA) says that after targeted incentives worth billions of dollars were introduced in the Budget, existing cover arrangements now need examination.
“So far the most relevant information for insurance brokers as business owners – and their clients – are the business tax initiatives that are predicted to help businesses grow and assist in our overall economic recovery,” NIBA CEO Dallas Booth says.
NIBA provided a summary of the most pertinent measures for brokers, including temporary full expensing until mid 2022 of eligible depreciable assets for about 3.5 million businesses with turnover up to $5 billion.
These businesses will also be able to offset tax losses against previous profits and tax paid, helping companies that were formerly profitable but now find themselves in a loss position due to COVID-19.
The full expensing measure creates an incentive for businesses to bring forward investment to access the tax benefit before it expires, and combined with the loss carry-back measure, $31.6 billion in tax relief is estimated for businesses.
NIBA says brokers should liaise with clients armed with a full understanding of what the new initiatives mean from an insurance perspective. For example, clients planning a significant capital upgrade may need to alter their sum insured.